Credit Cards for Bad Credit
Getting a credit card with a bad or no credit rating can be challenging but not impossible. If you’ve been trying to get a credit card and have been rejected or you know you have a poor credit score, then this is the place to be. Read our guide for the best credit cards for bad credit and some frequently asked questions (FAQs).
What is bad credit?
People tend to have ‘bad credit’ if they have a history of not paying bills or paying late and owing too much money. Bad credit is reflected in your credit score which will be classed as ‘poor’ or ‘very poor’.
Having bad credit is one of the main reasons why you may be turned down for a loan or credit card. Bad credit scores are very common and there are plenty of ways to improve it.
How do I know if I have a bad credit rating?
You can take a look at your credit history by asking any of the three main credit reference agencies, Experian, TransUnion or Equifax. You can request a copy of your credit history for free from these credit reference companies.
You can check your credit report with all three agencies for the most accurate representation of your score across the board. However, if you only want to check one, pick the credit reference agency that the credit card provider you want uses.
Don’t worry about the impact checking your credit report has either, the checks aren’t recorded on your credit report and only the credit reference agency will know about it. Remember to check your report regularly to keep on top of your score.
If, once you check your report, you discover that you do have a poor credit score, avoid applying for popular credit cards. Rejection is likely and multiple failed applications may further damage your credit score.
Don’t panic though, read our guide and apply for a credit card designed for people with bad credit.
Why do I have a bad credit score?
There are many causes of bad credit:
- Breaking your credit agreement - when you sign a credit agreement, you are agreeing to make at least the minimum payments on time every month and to never exceed your credit limit. If you break these rules, a black mark will be put on your credit history and your credit score will be lowered.
- Financial troubles - having a County Court Judgement (CCJ), being declared bankrupt or getting an Individual Voluntary Arrangement (IVA) will all leave a mark on your credit history and damage your score.
- Having no credit history - you could have ‘bad credit’ if you’ve never taken out credit or a loan before. This is because card issuers will have no idea about your financial history and how you handle paying back money.
- Too many credit searches - multiple applications for credit cards will leave hard searches on your credit file. This can damage your credit score. So, don’t keep applying if you are rejected!
What are credit cards for bad credit?
Credit cards for bad credit are designed to help those with low credit scores repair their rating with sensible borrowing and repaying money.
They operate just like normal credit cards but they are more likely to accept those with poor or very poor credit scores.
How do credit cards for bad credit work?
Credit cards for bad credit scores and regular credit cards work in the same way. You spend money within your credit limit and pay it back, making at least the minimum monthly payments. Fail to clear your balance every month, then interest will be added on top.
However, credit cards for bad credit do have two key things to note:
- They have lower credit limits (you can borrow less)
- They have higher interest rates
A bad credit score shows that you’ve struggled financially in the past. As a result, card providers won’t start lending you high amounts of money right off the bat. They charge more interest to encourage you to clear your balance and meet those repayments.
Your credit score will improve by being sensible and clearing your balance. Eventually, you’ll be able to apply for better credit cards with higher credit limits, lower interest rates and that offer other perks.
What credit cards can I get with bad credit?
There are different types of credit cards you can look at depending on whether you have a bad credit score or no credit history at all.
Credit Builder Cards
Credit builder cards are for people with a bad credit history or none at all. This is the type of credit card you are most likely to get if you have a bad credit score. Unlike secured credit cards (see below), credit builders don’t require a deposit upfront. Your credit history will be checked but some of these cards will still accept you even if you’ve been bankrupt before.
Credit builder cards will have a lower credit limit to make your borrowing more manageable. These cards will also have higher interest rates to encourage you to clear your balance.
Credit builder cards are designed to do what the name suggests, to build or rebuild your credit score. Responsible borrowing is encouraged. These cards might offer a higher credit limit and lower APR if you demonstrate sensible borrowing.
These cards are your best bet if you’re looking for a credit card with no or poor credit history.
Can I get a credit card without a credit check?
In the UK, you can’t get a credit card without a credit check. However, you may have heard of a ‘Secured Credit Card’ which is more common in the US. Secured credit cards are designed to help rebuild credit history. These cards require a deposit or a ‘security sum’ when you take out the card. The security sum can be the same amount as your credit limit. You will receive your security sum back when you close the card. Again, these cards aren’t available without a credit check in the UK and are normally found in the US.
Prepaid cards are an alternative to having cash in your pocket and can be used for everyday spending. They aren’t like credit cards as you load the money yourself before using the card. You aren’t borrowing money and paying back like you would with a credit card. As a result, prepaid cards don’t often impact your credit history as there’s no borrowing involved, you aren’t paying anything back.
However, some prepaid card issuers like Cashplus do offer a credit-building service with their cards. If you have a prepaid card with a Cashplus current account, you can add-on their credit-building service to your account.
The Cashplus credit-building service is very straightforward:
- Cashplus gives you a 12-month loan that you’ll pay back over 12 monthly installments.
- The funds will be held by Cashplus and you won’t be able to spend them.
- You pay monthly to repay the loan which Cashplus will report to the Credit Reference Agencies.
- Once you’ve paid off the monthly installments, you'll have paid off your Creditbuilder loan and improve your credit score.
This loan charges 0% interest.
What’s the difference between bad credit and no credit?
‘Bad credit’ means that you have a credit history but a poor credit score due to financial mistakes in the past. ‘No credit’ is still seen as ‘bad credit’ by card issuers because you have no history of borrowing and haven’t proved your creditworthiness.
A side note from Tom - At LatestDeals.co.uk we feel this is a bit stupid. Someone who has never needed to borrow money, nor has ever been in debt should be considered very responsible with money. But, the system is the system, and we’re here to help guide you through it.
Can I get a credit card without credit history?
You can still get a credit card without credit history. You are essentially in the same group as those with bad credit. Therefore, the credit builder cards will still be available for you to apply for as they will accept people without any form of credit history.
Once you’ve built up a strong credit history, you can move on and apply to better credit cards.
Eligibility criteria for credit cards for bad credit
The eligibility criteria for credit builder cards tend to be easier to meet because these cards are for people struggling to be accepted for normal credit cards. The criteria includes:
- Must be over 18 and a UK resident.
- Minimum income (if required, the minimum income tends to be low, around £3,000 to £5,000).
- Bankruptcy and CCJs – some lenders will accept people who have been bankrupt or have CCJs. Some time will have to have passed since, usually around 12 months.
- You must not already own another credit card of the same type.
How to apply for credit cards with bad credit
When applying for a credit card with bad credit, there are some things to keep in mind to boost your likelihood of acceptance.
1. Don’t apply for out of reach credit cards
Applying for the top credit cards with a poor credit history will be frustrating and could hurt your credit score further.
Each rejected application will damage your credit score more so make sure you’re applying to the right credit cards.
STOP if you have applied for a credit card and have been rejected! Rushing to apply for another may result in further damage to your credit score.
Look at our list of the best credit cards for bad credit. These cards will be much more likely to accept you but remember, only apply to one!
2. Use eligibility checkers first
Before applying for any credit card, you should see how likely you are to be accepted. Thankfully, this is easy as almost every credit card issuer has an eligibility checker on their website. This ‘soft check’ will indicate how likely you are to get a particular card. Soft searches won’t appear on your credit history.
Eligibility checkers will help you to choose between and apply to the right credit cards for your financial situation.
Remember, eligibility checkers only give you an indication of whether or not you will be accepted. These checkers don’t guarantee acceptance whatsoever.
3. Be wary of 0% introductory offers
Some crediting builder cards offer 0% interest on purchases or balance transfers for the first few months. On credit cards for bad credit, these introductory periods won’t last as long as other cards.
A few months of borrowing money without paying interest sounds great. However, if you don’t pay off your balance by the end of the 0% period, you’ll be charged the card’s standard (high) interest rate.
If you get a credit builder card with a 0% period, make sure you know exactly when that period ends so you can pay off your balance beforehand.
How to improve your credit score
If you are sensible, you can improve your credit score over time. This will make future applications for loans and credit cards easier. Here are a few ways you can improve your credit:
- Sign up to the electoral roll - registering to vote is a great way to boost your credit rating. Providing proof of address to credit reference agencies makes you look reliable.
- Limit applications - every time you apply for a credit card, it’ll be marked on your credit history. Don’t apply for too many cards at once.
- Don’t miss payments - if you have a credit card, always meet your monthly repayments and try to pay more than the minimum amount.
- Don’t use more than 50% of your credit limit - if you use too much of your credit limit lenders will think that your finances are unstable. Try to keep your balance low.
- Check your credit report - your score could be impacted by mistakes on your credit report. Get in touch with the credit reference agency to rectify any mistakes you notice.
Why your credit score is important
Your credit history is summarised by your credit score. This is how lenders decide whether to accept you for a credit card. This is why having a good credit score is so important!
Should I get a credit card if I have bad credit?
Poor credit history can be improved by using a credit card sensibly. However, a credit builder card does come with its own pros and cons.
- Likely to be accepted - despite past financial troubles or having no credit history, acceptance criteria is low on credit building cards.
- Improve your credit score - by borrowing and paying back money, your credit score will begin to improve.
- Section 75 protection - under Section 75 of the Consumer Credit Act, credit card companies are jointly liable as the retailer when you make a purchase over £100. That means if you need a refund you have some extra protection.
- You can make large purchases - if you need to make an unexpected large purchase, a credit card will allow you to do this and spread the cost.
- High-interest rates - credit builder cards will charge you more interest than other cards which can make them expensive.
- Low credit limit - you’ll be offered a low credit limit on a credit builder card. This means you won’t be able to borrow much money at once.
- Risk of debt - when you borrow money on a credit card, you run the risk of getting into debt which may further damage your credit score. Always make sure you can afford to pay back what you borrow!
If you need to borrow money and you know that you can afford to pay it back, then a credit card for bad credit could work for you.
How to use a credit card for bad credit
Follow our golden rules if you want to build a strong credit history and make the most out of your credit card.
1. Repay on time every month
Meet the minimum repayments set by your credit card provider every month. Better still, pay more or clear your balance in full if you can.
Miss a minimum monthly payment and you’ll be hit with a fee and your credit score will be negatively affected.
You can avoid paying interest by clearing your balance every month.
2. Check you really NEED more credit
If you already have existing credit cards, you’ll be able to get more credit on those once you’ve paid off any existing debt. Focus on clearing your credit card debt before taking on more credit.
You can borrow more money once you’ve cleared the debt on your current credit cards. This could work out cheaper as the interest rates on any existing cards you have could be better than what you’ll be offered on any credit cards for bad credit.
3. NEVER withdraw cash on credit cards for bad credit
When you’re short of money, it can be tempting to get cash advances using your credit card. However, multiple cash withdrawals are seen as a red flag to lenders because it’s so expensive to do, providers assume you must be desperate for cash.
You’ll be hit with a cash withdrawal fee and charged interest the moment you draw the cash out. Withdrawing cash isn’t a wise decision if you're trying to improve your credit score.
4. If none of the cards in this guide suit you - don’t borrow
If none of the credit cards listed in this guide suit you because, for example, the interest is far too high, then borrowing money isn’t worth it for you. Instead, try to cut down your expenses, shop wisely and create a proper budget.
If you’re still struggling financially, you might need debt help from a professional. Take a look at our guides on debt for more information in this area.
It isn’t worth borrowing money if you can’t afford to pay it back. You’ll only end up in a worse situation than you were before. Always prioritise paying off existing debts before taking on more credit.
How to compare the best credit cards for poor credit
If you’ve decided to go ahead and get a credit card for bad credit, there are a few things you should keep in mind when comparing these credit cards:
- Eligibility criteria - look for a card that has lower eligibility criteria to boost your chances of acceptance. Some credit cards for bad credit even accept those who have been bankrupt in the past.
- Building credit over time - try to get a card that will give you the change to improve your credit score and unlock more credit in the future. Some cards will tell you what your credit score is regularly and offer ways to help you to monitor your spending.
- Annual fees - you don’t want to be paying an annual fee when you are trying to improve your credit score. Pick one that doesn’t charge this fee!
- Extra perks - you aren’t going to find credit building cards with long 0% interest or amazing rewards. However, some do come with a short 0% interest on purchases period or some form of bonuses.
I can’t meet my minimum credit card payments due to coronavirus. What should I do?
Coronavirus has put a financial strain on many. If you have a credit card and are struggling to meet your minimum repayments, you may be eligible for help.
The Financial Conduct Authority (FCA) has introduced measures that allow you to request a freeze on credit card repayments for 6 months. However, you may still be charged interest in this period.
You have until the 31st March 2021 to request a freeze but make sure you agree with your lender before stopping repayments. This won’t leave a bad mark on your credit history either due to the exceptional circumstances.
If you can afford to keep paying, it’s best to do so as you will still be charged interest during this holiday period.
All payment holidays must end by 31st July 2021.